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Personal Injury Law Just Got Trickier For Hospitals

What Is Reasonable and Necessary?

We thought the tort law in personal injury cases was fairly well defined, but a new appellate opinion has got hospitals and their attorneys in a dither, while plaintiffs and their lawyers are throwing a big party.

Especially now that they can afford it. Let me explain.

Michael Huff got injured in a car accident and went to the hospital. When he left the hospital's care seven days later, it slapped him with a $34,000 bill that he didn't pay. Huff's lawyer then sued Steven and Matthew Wilkins for negligence in causing the car collision that injured Huff. State Farm insurance defended the Wilkinses. The hospital, Pioneer's Memorial Healthcare District, duly filed a lien in Huff v. Wilkins, claiming the $34,000 that Huff owed.

The jury awarded Huff more than $350,000, and before State Farm could even get out its checkbook to pay Huff, the hospital said, "First dibs on the $34,000 that Huff owes us."

Summoning all of the chutzpah they could muster, Huff's lawyers replied to the hospital, "Hold on there, bucko, those expenses weren't needed."

That's more legal talk. I'm getting into a pattern here in case you were wondering.

Like any good neighbor, State Farm put the disputed $34,000 in the Court's hands and told Huff and the hospital that they had to fight over the disputed money.

In legal talk, that step is called an interpleader. I know, legal talk is really boring. That's why I was warming you up to the first couple of legal phrases like "first dibs" and "bucko." Well, sure enough, Huff and the hospital both told the Court that they wanted the $34,000. At the trial of the matter, four things happened:

1. The hospital submitted the bills that Huff didn't pay;

2. Huff told the hospital that he had no insurance but should bill the Wilkinses;

3. The hospital submitted its lien notice that it sent to State Farm; and,

4. Huff's personal injury attorney confirmed that he had submitted all of Huff's medical bills in the case Huff filed against the Wilkinses and authenticated the $350K Judgment in Huff's favor.

Notice what's missing. Didn't notice? Well, how about the hospital's proof of the expenses it charged to Huff? Nowhere did the hospital say that the charges were reasonable or necessary. It just said Huff incurred the expenses.

Those are magic words in personal injury law. "Reasonable and necessary."

You see, in order for the hospital to recover the $34,000 lien that it placed on Huff's recovery of the $350,000, the hospital should have proved that the expenses it charged Huff were both reasonable and necessary. Under the Hospital Lien Act at California Civil Code sections 3045.1-3045.6 (a whopping five subparts), the hospital can only recover on its personal injury lien if it can prove that the expenses were both reasonable and necessary.

Look back on that list of four items that were introduced in the trial. Look carefully to see if there's anything there about the expenses being "reasonable" or "necessary." Can't find it? Neither could I, and I wrote it.

That's because the hospital either forgot or failed to do so. Now comes the Court's ruling. Because the hospital had the opportunity in the trial to introduce this evidence, say through a doctor who treated Huff, but failed to do so, the hospital got stiffed.

That's right: no recovery for the hospital, and Huff walked away with the $34,000. But don't get excited.

I suspect this case isn't completely over, however. Despite the hospital's failure to recover on its lien, the hospital can still sue Huff on both a breach of contract and equitable basis. Huff did get $34,000 in services that he apparently still hasn't paid for, and with this loss, that debt is pretty high on the hospital's radar screen. We'll see.

You Can't Stop Your Home Address From Being Given to Your Union

Local 721 of the Service Employees International Union is the exclusive bargaining representative of all Los Angeles County employees. No one employee can even ask his or her boss for a raise. SEIU speaks on behalf of everyone, whether the employees want them to or not. I don't know. I've never been in a union.

But from the sounds of the requirements, I'm not sure I would like it, especially because just about everyone else thinks the union is more important than the employees.

That's the sum and substance of the most recent California Supreme Court ruling on the subject. Let me give you a quick rundown of the facts here. First, the SEIU wanted the County to provide the home addresses of all County employees, including those the Union doesn't represent.

Let's just cut to the chase. Our Supreme Court sided with the Union.

The County initially refused to provide its employees' home addresses. The LA County Employee Relations Commission decided that refusal was an unfair labor practice. The County sued. The Los Angeles County Superior Court then denied the County's petition for relief. The County appealed, and the appellate court held that the County must provide the home addresses of its employees, but imposed an "opt-out" procedure that would allow employees who had privacy concerns to not provide their home addresses to the Union.

The Union, at all times, was able to reach the employees it represented while they were at work.

After the appellate court ruling, however, the Union appealed to the California Supreme Court, which reversed the appellate court's opt-out procedure, saying that the "balance" between the Union's "right" to know and the employees' privacy tipped in favor of the Union "who represented them" - even though there are County employees who have opted out of union representation.

You be the judge here. Which is more important? Your privacy or your union?

When Is An Insurance Agent Not An Agent?

When She's the Middleman!

You may be surprised to learn that an insurance broker, despite the broker's more commonly known name of "insurance agent," isn't really always considered an agent of the insurance company. Sure, there are some insurance companies that actually have insurance agents, like Farmers and Allstate, but not other companies that lack an actual agent force who sells only for that particular company.

Why is this distinction important?

Just as American Way Cellular. It purchased an insurance policy for its warehouse from Travelers through an insurance broker (note the name, "broker") and then as you would expect, had a fire loss. That's right. The warehouse burned down. When it submitted a claim for coverage, Travelers denied the claim because the application, filled out by the broker, said that the warehouse had a sprinkler system.

As I am sure you have already guessed, the Court of Appeal in American Way Cellular v. Travelers didn't just issue this guidance for our benefit, it was deciding the lawsuit that erupted between American Way Cellular and Travelers. American Way didn't have a sprinkler system (thus the reason that there was more damage), so Travelers cited the application condition and denied American Way's claim.

Ouch.

American Way sued claiming that it was Traveler's insurance agent who wrongly wrote down on the application that it had a sprinkler system, so it was really the broker's fault, and therefore, since the broker was an agent of Travelers, Travelers had to pay the fire claim.

By definition, a broker can sell insurance for more than one company. According to the Second District Court of Appeal here in Los Angeles, that ability means that the broker is not an agent of any of the insurance companies the broker represents, but instead a "middleman."

A "middleman?"

Yep. The guy in between. The one who takes a cut, but cannot act on behalf of the insurance company. But wait a minute here. The definition says, "represents." Doesn't an agent also represent? Yes, but.

Here, that "but" means that in order for the situation to rise to the level of an agency relationship between the broker and the insurance company, the Court of Appeal ruled, "the principal, and not the agent, must make statements or commit acts causing the person relying on the apparent agency to believe the agency exists."

So, when an insurance broker or agent tells you that he/she is the agent of the insurance company, don't believe them. Make sure you get something from the insurance company where the insurance company tells you who its agent is.

That's a pretty stiff requirement to do a lot of extra work when you're buying an insurance policy, especially if you don't review in advance the application that the insurance broker fills out before it is sent to the insurance company. You might just not have any insurance coverage like American Way Cellular, Inc. didn't if your broker fills out the application wrong, perhaps mistakenly checking the box that says you have a sprinkler system when you don't. Then, after a fire, you've got no coverage, and most likely an insurance broker who doesn't carry enough insurance to cover the cost of the broker's mistake.

Double ouch.

We can't tell from the opinion whether that's the case here, but logic initially tells us that's the case since American Way sued Travelers Insurance instead of the insurance broker. If that's the case, and given the results of this appellate opinion, American Way was just out of luck all the way around.

Triple ouch.

This case is a hard one to take a lesson from, however, because we find out the real reason coverage was denied and that denial was upheld by the Court of Appeal. This case may fall into that realm where one fact makes bad law. Here's the fact they don't list up front in the opinion: apparently, one of the owners of American Way told the broker that it had a sprinkler system in its warehouse when it didn't. As an aside here, and this is just a guess, but there may be a reason why the owner said the warehouse had a sprinkler system: insurance companies offer lower premiums for sprinkler systems.

That's the real reason why American Way didn't sue the broker. The broker was just doing as he was told to do. That's also the most likely reason that the Court of Appeal reached the decision it did. Even if there was an agency relationship between Travelers and the broker, the negligence was on the owner's side, not the agent or the insurance company's side.

But wouldn't it have just been easier to say it the way I just said it instead of creating a whole bunch of extra work to find out whether they guy or gal that sells you insurance is a broker or an agent?

Perhaps.

But then you wouldn't really know whether your coverage is good or not. Better to review the application before the broker/agent sends it off to the insurance company, and better to know whether you can take what the agent says as if the insurance company said it.

That way, when the fire comes, you won't have to hire me to sort it all out for you. By doing your homework ahead of time, the problem will never affect you.

Oh my! The Folks in Marin Might Have to Look At Big Water Tanks

Faced with a predicted water shortage in 2025, the Marin Municipal Water District imposed significant water conservation restrictions on its residents and businesses. When those efforts failed, however, the District started looking around for more water sources. Fortunately, they didn't have to look too far since the Pacific Ocean abuts Marin County.

The ocean's so big it's hard to miss. Plus, it's got plenty of water; just not drinkable water.

With a desalinization plant, however, the MMWD could easily meet its predicted water shortage, and perhaps then some. With the type of planning unknown to other governmental agencies like CalTrans, even though the MMWD needed an additional 5 million gallons per day, the District planned to build a plant that could produce as much as 15 million gallons per day.

In order to hold the potable (drinkable) water that the MMWD plant is expected to produce once built, the District also planned to build three big water tanks, sufficient to hold 2-3 million gallons of water. Those tanks have to go somewhere, and the MMWD planned to place them on nearby mountain ridges.

According to the laws of gravity, water flows downhill, so putting a water tank higher than the homes and businesses it services means that those folks will have water pressure for their sinks, faucets, showers and toilets. It also means that they get to see the tanks perched on the top or near the top of mountain ridges, and affecting the scenic views.

You know what comes next. That's right. The folks at the North Coast Rivers Alliance didn't like the idea of looking at big water tanks on mountain ridges, so they did what every red-blooded Northern Californian would do: they sued.

That's right. The NCRA filed a lawsuit challenging the sufficiency of the EIR (Environmental Impact Report) under the California Environmental Quality Act that the MMWD used to approve the project. The NCRA claimed that the EIR did not provide enough information to the MMWD Board of Directors to allow them to approve the placement of the tanks.

Now let's pause for a moment here for some background on EIRs. An EIR is simply designed to provide information about significant environmental impacts. Projects that have significant environmental impacts can still be approved - they just have to be adequately mitigated or the approving agency can override the adverse impacts with the appropriate findings of necessity. But, the EIR is simply informational.

As the court said in its opinion: "the issue is whether substantial evidence supports the agency's conclusions, not whether others might disagree with those conclusions." That's a hard pill for environmental groups to swallow. There's some legal jargon in that quote that didn't know you might have overlooked, but you shouldn't have. "Substantial evidence" has been defined by courts as not much more than a "scintilla."

Most groups like the NCRA challenge EIRs because the challenge creates a long delay that typically kills a project because the developer cannot service the debt load of the project without income from home sales in the interim. And since the development can't be built while the legal challenge is pending, the project dies due to lack of funding.

But the MMWD doesn't have that problem. In fact, it has an almost endless supply of tax dollars. Those tax dollars come from some who belong to the NCRA, so those folks are actually funding both sides of the dispute; the ultimate irony here.

When the dispute gets to the court, the court then looks at a series of criteria to determine whether the EIR provided enough information to the MMWD Board of Directors to make the decision to proceed with the project, despite the adverse visual impact. To mitigate this impact, however, the Board required a landscaping plan to hide the tanks on the ridges. Nonetheless, you'd still be able to see where the tanks were if you looked.

In the court's analysis, it looked at the EIR, which set forth the following standards of significance: "For the purposes of this EIR, the project would have a significant impact with regard to aesthetics if it would:

[1.] Have a substantial adverse effect on a scenic vista. For this EIR, a scenic vista is defined as a publicly accessible viewpoint that provides expansive views of a highly valued landscape. A viewpoint that is accessible only from private property is not considered a scenic vista.

[3.] Substantially degrade the existing visual character or quality of the site and its surroundings.

[4.] Create a new source of substantial light or glare that would adversely affect daytime or nighttime views in the area."

Where these elements are met, the court has no choice but to approve the agency's decision. Here, the court ruled:

the EIR included a detailed discussion of potential aesthetic impacts of development of the [...] tank, including the size and shape of the tank, satellite image analysis of impacts from four directions, visual simulation, and impacts on vistas from homes and hiking trails and the highway. This analysis constitutes substantial evidence supporting the conclusion that the impact is less than significant.

So with that, the court thought that the MMWD Directors had enough information and made a fully informed decision to overcome a significant public issue: the need for water.

Marin will get its desalinization plant and three water tanks, and the residents of the area will have to see three big tanks on their mountains, hopefully mostly blocked by landscaping designed to hide the tanks.

Insert "Awwww..." here if you're from Southern California, where most folks don't understand the things that bother their fellow residents up North, and for that matter, vice versa. As Joni Mitchell sang, they "paved over paradise" in SoCal, and that's what they're trying to prevent in Marin.

The message to take away from this case was succinctly stated by the court itself: ‘the reviewing court may not set aside an agency's approval of an EIR on the ground that an opposite conclusion would have been equally or more reasonable, "for, on factual questions, [the court's] task" is not to weigh conflicting evidence and determine who has the better argument" (citations omitted).

In other words, the court's task is simply to determine whether the EIR provided enough information to the District's Directors to make the decision they did. The court cannot substitute its own decision for the District's Directors.

Convicted Killer of Seven Wants Playstation in Jail Cell

Sues to Get Toy; You Be the Judge

You may never have heard of Julian Knight, but that's likely because not only is he down under, but he's also under sentence. Seven of them. Life sentences, that is. Knight (I can't bring myself to put a "Mr." before his name) was an army cadet and in 1987, he clambered up a billboard overlooking Hoddle Street, a very busy street in Melbourne.

That's Melbourne, Australia, in case you haven't been following along. As a disclaimer, I am not licensed to practice law in Australia, but the situation this case raises is one we face in the states where I am licensed to practice law. Plus, I'm going to bet that even if you don't own a license to practice law, you are still going to have an opinion on this one.

Read on.

As he climbed up the billboard, Knight took with him two rifles and a shotgun. As you've likely guessed, he then fired shots at numerous passing cars (as well as a police helicopter). He killed seven people and wounded 19 - thus the seven life sentences. Since the Hoddle Street massacre (as it became known) was in 1987, you're likely now asking. "why am I just hearing about this now?"

That's because Knight now - some 26 years later - wants to be able to play on the computer while he's in jail. He wants a playstation. He also wants the computer so he can become a better jailhouse lawyer so he can fight his way out of jail legally. He's already been labeled as a vexatious litigant according to news sources, which means he pretty well understands how to file lawsuits from the jailhouse. He's apparently not very good at it, however, since he's still in jail. That's why he needs to conduct legal research on the computer.

And play. After conducting legal research, I'm guessing that one of his arguments is that he needs to relax and rest your mind. I can attest to that need, but I'm just not sure that Australia is all that willing to plug a computer into his jail cell and attach a playstation to it just so Knight can relax after a hard day on the computer.

By spending more time on the computer. Although that argument is lost on me, Knight's request isn't. The jailers turned down his request, so now he's suing to get a playstation in his jail cell.

It raises the question of what constitutes punishment, retribution, rehabilitation and deterrance. Those are genreally considered the four main goals of our criminal justice system. As a society, we've also agreed with each other to avoid cruel and unusual punishment.

Knight claims that there are other prisoners in his jail who have computers and playstations. Just not him, and he claims that disparate treatment is unfair. I suspect that if we were now able to ask those seven people who Knight killed whether it was fair that they were killed, they'd say no. But those answers don't seem to deter Knight from his request, if that thought even crossed his mind before he asked.

The Big Print Giveth and the Small Print Taketh Away

In Other Words, Read What You Sign First

People never cease to amaze me. Let's say you're a computer manufacturer in China, and you agree to sell, oh, say $2 million in computer parts to a computer company in the United States. Logistically, you've got one big problem on your hands. How do you get all of those parts from China to the US?

They're too heavy for a plane and trucks don't float, so you choose a boat. Well, actually a freighter. You know, those great big boats with lots of containers to hold your computer parts.

So here's the deal. The manufacturer signs a contract with a shipping company, and then sets off to make the parts. A year later, the parts are finished and loaded on the boat. Er, freighter.

The shipping company, however, doesn't work with contracts, they work with Bills of Lading. So, the shipping company issues two bills of lading, one for each container. Those Bills of Lading, however, contain a limitation that prevents the manufacturer from suing them more than a year after the parts are delivered. That limitation was not in the original contract that the manufacturer and shipper signed.

Well, as things sometimes happen, the deal went awry. The original contract said that the shipper was not to release the parts to the US computer company without the manufacturer's permission.

As you have guessed, the shipper released the $2 million of computer parts to the US computer company without the manufacturer's permission. Unfortunately for the manufacturer, the US computer company filed for bankruptcy shortly after receiving the parts from the shipper, and never paid the manufacturer the $2 million.

How this next part happened eludes me, but the manufacturer DIDN'T NOTICE that it hadn't been paid the $2 million FOR MORE THAN A YEAR. Must be nice to have that much money that you don't miss $2 million for a year. Wow.

When the manufacturer finally woke up realized that the money was missing and the computer company had filed bankruptcy, it called the shipper and told the shipper to return the computer parts since it had never given permission to the shipper to release the parts to the computer company.

The shipper fessed up and admitted that it had improperly released the computer parts without permission, but relying on the one-year limitation in its Bills of Lading, refused to pay the manufacturer. Not surprisingly, the manufacturer sued the shipper.

Guess who wins here?

That's right....the shipper. The manufacturer tried to rely solely on the original contract, but the court said that the Bills of Lading constituted a subsequent and valid contract, and the one-year limitation against suit was enforced.

Just goes to show you. Read the small print on the back. That's where the one-year limitation was printed.

When Is a Volunteer an Employee Covered by Work Comp? It Depends on the Pixie Dust you Sprinkle.

Well, Disneyland is in Orange County, after all, so the term "Pixie Dust" is considered jargon around here. Not legal jargon, mind you, but anyone who's gone to Disneyland understands. In this case, it means the words you use to get what you want.

Let me give you the setup, even though the opinion is shy on details. Diane Marie Minish went to the Mount Madonna Center of the Hanuman Fellowship (a group that teaches the theory and practice of yoga). The Mount Madonna Center is a "conference and retreat center located on 355 acres of mountain-top redwood forest and grassland overlooking Monterey Bay, between Santa Cruz and Monterey, in Northern California," according to their website.

It turns out that Ms. Minish went to the Center's property to visit a sick friend, and then when asked to get someone from elsewhere on the property, the Center directed her to hop on the forks of a forklift, and off she went. Well, you know what happened next. That's right. She fell, was injured and went off to the hosptial.

Here's where the parties' stories differ. The Fellowship apparently submitted a workers' compensation claim for her and she started to get money, which she tried to return and informed the workers compensation appeal board that she was neither an employee nor a volunteer and that the work comp claim was fraud. The Fellowship listed her as a volunteer, and having previously sprinked the Pixie Dust of Labor Code section 3363.6 over its volunteers, submitted the work comp claim.

This Labor Code section allows not-for-profit organizations to ensure that its volunteers are covered by worker's compensation just like their employees. It's a good idea for the non-profits - it avoids the liability for lawsuits like Ms. Minish's because once you're covered as either an employee or volunteer, your remedies against the non-profit are limited to the benefits provided under workers compensation.

No tort or punitive damages liability. That's a big benefit for the non-profits. And if you've been following along like the diligent reader that you are, you just figured out the rub in this case. Yep. Ms. Minish didn't want the workers compensation benefits. She wanted the big money that was available in an everyday, run-of-the-mill personal injury lawsuit.

In this case, there are a series of unusual facts that resulted in reversing the trial court's judgment in favor of the non-profit, and allowing Ms. Minish to proceed to argue that she should recover tort and punitive damages and not be limited to only the workers compensation benefits. Those facts most interest the two parties - not you - because you've already learned what you came here to learn.

If your non-profit wants to avoid getting sued by volunteers who get injured on your property, you must get a "Volunteer Endorsement" on your workers compensation employee and you must have your Board of Directors adopt the resolution required by California Labor Code section 3363.6. If you are a volunteer, you've learned not to hop on the forks of a fork lift and travel across uneven ground. You might fall and get hurt, and if you do, you just might be limited to workers compensation remedies.

When Is A 10˘ Charge Imposed by the Government Not A Tax?

You'll be happy to know that the 10¢ charge that Los Angelinos are required to pay to grocery stores for using a paper bag isn't a tax, even though the charge was imposed by the Los Angles County Board of Supervisors. That's right, even though you get to pay more, it's really not a tax.

Really.

Let's think about this one for a minute. Ok. I'm done. How about you? Convinced yet? If not, then think about the argument that the County used to convince the state court (wonder why this case wasn't tried in federal court?): the County argued that it wasn't a tax because the money wasn't paid to the County.

Actually, the ordinance allows the grocery stores to keep the 10¢ charge to offset the "cost of compliance." What? How much could it possibly cost to comply with this ordinance? There's some bagger at the end of the check out counter saying, "Hey there, customer, you have to pay 10¢ to use that paper bag."

Right. That statement alone must cost the grocery store a whopping 10¢.

Don't get me wrong here, I'm all for the purpose of the ordinance - eliminate the use of plastic bags, cut down on the use of paper bags and encourage grocery shoppers to bring reusable canvas bags. You knew, didn't you, that deep down, us Angelinos are all just grown-up hippies, tree huggers, earth-shoe wearing liberals who want to save the environment?

Well, some of us actually rail at taxes. This case, Schmeer v. County of Los Angeles, had plenty of environmental star power at the helm (Surfrider Foundation and the Environment California Research and Policy Center), but this tax case went down in flames anyway.

Judge Chalfant, an excellent judge, saw it the other way and looked past the wording of the ordinance and ruled that because the 10¢ charge didn't go to the County it wasn't a tax, reasoning that in order to be a tax, the money has to go to the County. Where the 10¢ charge stayed with the grocery store, neither Judge Chalfant nor Justice Croskey, writing for the Court of Appeal, thought we all expect taxes to go to the government, and when the money doesn't, it's not a tax.

Sounds reasonable, until you read the wording of the definition of a tax. Nowhere in that definition do you see the reasoning that the money has to go to the government:

"As used in this section, ‘tax' means any levy, charge, or exaction of any kind imposed by the State [County], except the following [five exceptions, none of which require that the money be paid to the State [County]]"

I don't know about you, but that 10¢ charge sounds an awful lot like a tax to me, even if the money doesn't end up in the State's hands (which some of it will anyway, because the grocery store has to pay tax on its income, but that's a different story, they say).

Maybe one of the parties will get the California Supreme Court's attention, and perhaps they will see it differently.